Sobeys to acquire Safeway’s Canadian business for $5.7 billion

STELLARTON, N.S. — Sobeys, Inc., a wholly-owned subsidiary of Empire Company Ltd., has agreed to acquire Canada Safeway Ltd., the Canadian business of Pleasanton, Calif.-based Safeway, Inc., for approximately $5.7 billion (C$5.8 billion).

“The acquisition allows us to leverage our existing assets and in turn position Sobeys to compete even more effectively within the changing, and increasingly competitive, grocery retail landscape,” said Paul D. Sobey, president and chief executive officer of Empire. “Empire is committed to continuing its focus on food retailing and related real estate assets and will continue to own 100% of Sobeys, which will be a stronger food company with excellent growth prospects.”

Founded in 1907, Sobey’s owns or franchises more than 1,300 stores under retail banners that include Sobeys, IGA, Foodland, FreshCo, and Thrifty Foods, as well as Lawton’s Drug Stores. The company also operates more than 260 retail fuel locations.

Robert Edwards, president and c.e.o. of Safeway, said the company will use the substantial cash proceeds from the transaction to create value for Safeway stakeholders and contribute to the growth of the ongoing business.

“We are pleased to enter this agreement with Sobeys in order to realize the higher multiples attributed to Canadian supermarket companies,” Mr. Edwards said.

Safeway plans to use the proceeds from the divesture to pay down debt, buy back stock and invest in growth opportunities.

For the year ended March 23, Canada Safeway’s revenues were $6.6 billion (C$6.7 billion).

The boards of directors of both companies have approved the transaction, and it is expected to be completed during the fourth quarter of 2013.